Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com Why you shouldn’t panic when “REFINANCE” IS NOT A DIRTY WORD you lender says it’s time to refinance. ARCHER COOPERATIVE CREDIT UNION The “roots” of Archer Credit Union date back to 1906 when the Citizens State Bank was chartered at Archer, Nebraska. In 1934, the bank became an Agriculture Cooperative Credit Association. Then in 1984, it was rechartered to gain Federal deposit insurance and became a credit union. We’ve offered financials services to residents and farm businesses for over 100 years. What is the credit union difference? A non-profit financial institution who is owned by its members (customers). Our board of directors are volunteers. We are federally regulated and insured by the NCUA (National Credit Union Association). 1
Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com REFINANCE BASICS What is a refinance? Why is it needed? A refinance is replacing existing debt Conditions in the operation that may with new debt under more favorable trigger a refinance: terms for the operation at that time. * Operation has had a loss (commodity OR: income is less than operation expenses) Taking debt and moving it around on the * Large amount of machinery & financial statement to improve the equipment debt financial condition of the operation. * Combination of the above LENDING 101 Balance Sheet A snapshot showing financial position at a specific point in time. Asset = Liabilities + Owner’s Equity Divided into three sections: * Current * Intermediate * Long-term 2
Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com LENDING 101 Cashflow The amount of cash in flows and out flows from the operation over a given period of time. Predicting the future of the cash needs of the operation. LENDING 101 Income / Expense Trends Analyzing tax information to see how the operation has performed in years prior. 3
Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com FARM RATIOS AND GUIDELINES Ratio Definition Formula Ideal Range for an Operation Working Capital Measures liquidity by determining Current Assets – Current Liabilities Positive # how much short term capital the operation has. Debt to Asset Ratio Tells how leveraged an operation is. Total Liabilities / Total Assets Green < 30% This is how much of your operation Yellow 30% - 60% does the financial institution own. Red > 60% Net Farm Income This is the return on the work you have Gross Farm Income – Gross Farm Positive # invested into your operation. This is Expenses (+-) Inventory changes – before family living and taxes. Depreciation Debt Service Margin Tells how well the operation can Funds available (Net Farm Income + Green > 1.25 support the term debt payments. Non-Farm Income – Taxes – Family Yellow 1.25 – 1.00 Living + Depreciation + Interest) / Red < 1.00 Total Farm Principal and Interest YOU’RE HIRED!!!!! 4
Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com REFINANCE #1 REFINANCE #2 5
Dallas Zimbelman, Archer Credit Union dzimbelman@archerccu.org (308)795‐2204 archerccu.com REFINANCE #3 I’VE REFINANCED, NOW WHAT? * Have conversations with the lender to identify what led to the refinance. * Make changes to ensure the same situation isn’t repeated. * Use the cash flow through out the year to see if the operation is on track for projected income and expenses. 6
Recommend
More recommend
